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Deposit outflows slow to €342m in August for domestic banks

IRISH individuals and businesses are now more likely to pull their money out of foreign-owned banks than bailed-out Irish institutions, fresh data from the Central Bank shows.

The trend was revealed in new data showing private-sector deposits in the 'covered' banks fell just €342m in August, while the 'other' domestic banks suffered a fall in deposits of about €1.3bn.

The August performance is in marked difference to the pattern for the last 12 months, as almost €25bn of private-sector Irish deposits left the 'covered banks', while €200m flowed into 'other' domestic banks.

The covered banks, largely AIB/EBS, Bank of Ireland and Permanent TSB, have been reporting stabilising deposits since their latest recapitalisations at the end of July.

The encouraging August deposits performance doesn't take account of Permanent TSB's acquisition of €650m in deposits from Northern Rock, since that deal won't actually go through until the end of the year. Some industry sources fear buoyant deposit performance may have reversed again in September, as increasing speculation about the future of the euro prompted savers to take cash out of bailed-out and foreign-owned banks alike.


Yesterday's data also shows that new lending continues to be subdued, with loans to households down 4pc in the 12 months to the end of August, including a 9.1pc fall in "consumption and other" loans and a 2.4pc decline in home loans.

The lower lending coupled with early repayments of loans meant householders' overall borrowing reduced by an average of €450m in each of the three months to the end of August.

The lending trends were mirrored in the business sector, where new lending contracted 2.5pc in the year to the end of August.

On the funding side, the bailed-out banks' reliance on money from the European Central Bank remained virtually unchanged at €68.4bn.

The figure is expected to decline by the end of the year, as banks raise market funding and sell off 'non-core' assets.

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